Rising NT dollar could impact electronics makers

GREENBACK LOSSES:With the local currency lifted by foreign fund inflows, analysts warned that local firms suffer whenever it makes significant gains against the US dollar

Staff writer, with CNA

A rising New Taiwan dollar is likely to impact the bottom lines of local electronics-component makers, although the central bank has stepped up its efforts to cap the gains posted by the local currency, analysts said on Saturday.

Since the end of the third quarter of last year, the NT dollar has risen NT$0.282 or 0.96 percent against the US dollar.

Without the central bank’s intervention, the local currency could have breached the NT$29 mark.

The latest closing level of the NT dollar was NT$29.060 against the greenback on the foreign exchange market on Friday.

The strength of the NT dollar is largely due to the massive inflows of foreign funds after major central banks around the world, such as the US Federal Reserve and the Bank of Japan, raised liquidity levels to provide an economic boost.

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), one of Taiwan’s leading integrated circuit packaging and testing-service providers, is expected to suffer a 0.1 percentage point decline in its gross margin with each NT$0.1 rise in the NT dollar against the US dollar, analysts said.

In fact, the pinch of the impact from a stronger NT dollar was felt by ASE as early as the fourth quarter of last year, when sales generated from its material supply operations rose only 1.5 percent from a quarter earlier, in NT dollar terms, while sequential revenue growth in US dollar terms stood at 4 percent.

Rival Siliconware Precision Industries Co (矽品精密) is likely to see its gross margin fall by about 0.2 percentage points whenever the NT dollar gains NT$0.1 against the greenback, analysts said.

They said Siliconware’s sales had been affected by the strength of the NT dollar as early as last month, and the impact would grow if such unfavorable circumstances continued.

Chipbond Technology Corp (頎邦), a driver integrated circuits packaging and testing-service provider, is also sensitive to fluctuations of the NT dollar, while Nan Ya Printed Circuit Board Corp (南亞電路板) has been feeling the pressure as its accounts receivable are denominated partly in US dollars, analysts said.

Analysts added that Tong Hsin Electronic Industries Co (童欣電子), a light-emitting diode substrate product maker, is likely to suffer a decline of more than NT$20 million in sales every month, whenever the NT dollar climbs NT$1 against the US dollar.

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